Low spending, fewer new contracts: Why defence upgrade funds got modest hike of 6.5%

This means the Army has spent around Rs 23,000 crore, while the Navy and the IAF have spent Rs 27,500 crore and Rs 30,000 crore, respectively, of their capital allocations earmarked for 2022-23.

A top government official said one of the primary reasons for the inadequate spending is that much of the previous milestone payments has not be cleared as yet because of delay in deliveries in certain cases fuelled by the Covid-19 pandemic and also with India not able to process payments to Russia after the sanctions-hit country started fighting a war with Ukraine in February last year.

“Also, there weren’t many new contracts that materialised and thus the absorption capacity for additional funds was low,” the official told The Indian Express, adding that the both committed liabilities and new contracts are factored in while allocating capital budgets.

The three services have only two months to spend their capital budgetary allocations, else their funds may be surrendered. Towards this, the defence ministry has held hectic meetings in the past several weeks with the services and the defence public sector undertakings in a bid to expedite new contracts and payments.

“Every contract is being closely monitored and efforts are on to iron out any issues so that they can be expedited and concluded,” a second government official said.

The Indian Air Force got the highest capital budgetary allocation among the three services at Rs 57,000 crore, which was a mere 3.6 per cent hike from the previous fiscal.

The Army was allocated Rs 37,000 crore, a hike of 15.6 per cent from last financial year’s budgetary allocations, the Navy was allocated a capital budget of Rs 52,000 crore, up by 10.6 per cent from 2022-23.

The overall defence budget earmarked for 2023-24 is Rs 5.94 lakh crore, including pensions of Rs 1.38 lakh crore, up by 12.9 per cent from Rs 5.25 lakh crore allocated in the previous (2022-23) fiscal. This is 13.18 per cent of the total budget outlay of Rs 45,03,097 crore.

The Indian military got a 44 per cent hike in the Indian military’s sustenance budget that will be utilised towards stocking up on fuel, ammunition and maintenance of assets, through procurement of critical spares and other capabilities.